Prices Are Down, but Saudis Keep Oil Flowing

By Clifford Krauss And Stanley Reed, NY Times, May 31, 2015

HOUSTON–The international cartel of oil producers has long followed the same basic strategy. When the market was soft, the group slashed production to raise prices.

But Saudi Arabia, the heavyweight of the Organization of the Petroleum Exporting Countries, has a new agenda. It is now less concerned about the price of crude oil in the global markets and more concerned about delivering fuel to its growing economy.

The shift is upending the traditional market dynamics that have influenced the direction of oil prices for decades.

While American producers are pulling back in the face of the current weak prices, Saudi Arabia, the largest OPEC producer by far, has been pumping more and more barrels. Saudi Arabia’s daily production in March and April nearly equaled its record output in 1980 when prices were soaring.

The country’s allies, Kuwait and the United Arab Emirates, are also drilling at record rates, while Iraq is shrugging off widespread civil conflict to increase production. Even Iran is preparing plans to develop more oil fields.

The surging output has taken much of the mystery out of what the delegates of the 12 OPEC countries will do when they assemble in Vienna this week to set production levels for the next six months. They have already pushed the cartel’s output 3 percent above the current target, and production appears to be heading even higher.

The acute pressure to cut production is also off. Oil prices, after a sharp drop over the last year, have stabilized somewhat at more than $60 a barrel.

“No cut is coming,” said René G. Ortiz of Ecuador, a former secretary general of OPEC. “Each and every country, and particularly the Saudis and the other monarchies of the gulf, will protect their market share and increase their market share as much as possible.”

Read More

In Challenge, Former Rebels in Libya Form Own Oil Company

By Clifford Krauss, NY Times, November 11, 2013

Former rebels who fought the Libyan dictator Col. Muammar el-Qaddafi and are now challenging Libya’s shaky central government have announced the creation of their own oil company to sell crude from oil fields and port terminals they currently occupy.

For the past three months, most of Libya’s oil production and exports have been halted by loosely aligned militias in the eastern region of the country that are pushing for autonomy. They have made Prime Minister Ali Zeidan’s government, which has repeatedly threatened to arrest the occupiers, look increasingly impotent, which emboldened eastern political leaders, including some former rebels, to form an autonomous regional government last month.

The establishment of a regional oil company was largely seen as a symbolic move since few oil shipping companies would rush to challenge Tripoli authorities and Western governments that want to see a central government succeed. But the company represents another escalation of tensions over the country’s most strategic economic asset.

"It’s just another sign that the political process of forming a national government is in deep disarray," said David L. Goldwyn, the State Department coordinator for international energy affairs from 2009 to 2011.

Mr. Zeidan, who was briefly kidnapped by a militia group last month, spoke of the oil blockades in stark terms at a news conference on Sunday. “We have given these groups a week to 10 days after which the government will exercise its functions,” he said. “We will act appropriately.”

Libya’s economy is largely dependent on the oil industry, which is dominated by the national oil company working in partnership with several major international ones. Last year, more than 90 percent of the government’s revenues and the country’s export revenues came from oil and gas.

Under normal circumstances, Libya supplies about 1.5 million barrels a day, or roughly 2 percent of global market needs. But in recent months, it has produced less than 300,000 barrels a day.

Southern Europe is most dependent on Libyan oil and gas exports, and that dependency became more tenuous on Monday when protesters shut down a gas export pipeline while demanding more rights for the Berber minority that lives mostly in the southern desert.

The formation of a regional oil company independent of the Libya’s national oil company was particularly provocative coming less than a week after the central government issued a statement threatening that the country’s air force and navy would use “force, arrest and detention” against anyone who tried to buy oil from the militia guards. The self-created regional government, known as the Cyrenaica Political Bureau, is intended to recreate the system maintained by King Idris in the 1950s when Libya was divided into three semiautonomous states. The oil-rich east, the base for the insurrection against the Qaddafi government, has long complained of being exploited for its mineral wealth by the western political elite in Tripoli.

Read More

U.S. to Surpass Saudi as Top Oil Producer by 2016

Reuters, November 12, 2013

LONDON—The United States will stride past Saudi Arabia and Russia to become the world’s top oil producer by 2016, the West’s energy agency said, bringing Washington closer to energy self-sufficiency and reducing the need for OPEC supply.

But by 2020, the oilfields of Texas and North Dakota will be past their prime and the Middle East will regain its dominance—especially as a supplier to Asia, the International Energy Agency (IEA) said on Tuesday.

The IEA, which advises large industrialised nations on energy policy, predicted in its 2012 World Energy Outlook the United States would surpass Riyadh as top producer in 2017.

Introducing this year’s outlook, IEA Chief Economist Fatih Birol said the agency now expects the re-ordering by 2016—at the latest.

The IEA said oil prices would continue to rise and spur development of unconventional resources such as the light, tight oil that has fuelled the U.S. oil boom, oil sands in Canada, deepwater production in Brazil and natural gas liquids.

While tight oil output is set to soar in the next few years, the Paris-based agency said the world was not “on the cusp of a new era of oil abundance”.

By the mid-2020s, non-OPEC production will fall back and countries in the Middle East—home to core members of the Organization of the Petroleum Exporting Countries—will provide most of the increase in global supply.

"The Middle East is and will remain the heart of the global oil industry for many years to come," Birol said.

Read More